Before we talk about different types of orders, we need to understand the two type of trades available in online trading.
- · Buy trade (long position)
- · Sell trade (short position)
The best part of online trading is that it gives traders every opportunity to initiate a sell trade in any available trading instrument without even holding it at first.
A trader/investor will initiate a buy trade when it expects to profit from rising prices. On the other side, a short trade is initiated with the expectation of making money from falling prices. But we should understand here that unlike buy trade, losses from a short trade can be unlimited.
There are mainly four types of orders in online trading:
- 1. Market order
- 2. Limit order
- 3. Stop loss order
- 4. Trailing stop order
Market order is when the trade is executed at the current available rate. In MT4, there is a “Buy” and “Sell” button/s that can execute a market order immediately.
A limit order will only get executed if the price triggers with the specified limit price. We can use the limit orders in both types of trades “Buy” and “Sell”.
Stop loss order
Stop loss order is used to restrict a possible loss from a trading position if the trade start going against you. Stop loss orders can also be used in both types of trades. For “buy trades” stop loss is set below the buying price and for “sell trades” stop loss is set above the sell price to restrict the losses.
Trailing stop loss
Trailing stop loss is used lock in profits that are already generated after the price moves in your trades direction. This stop loss can either be defined in percentage or in amount. Trailing stop loss moves in the direction of price, it increases in the long trade and falls in the short trade.